Economic Growth
FIN 30220:
Macroeconomic
Analysis
Long Run Growth
The World Economy
Total GDP (2013): $87T
Population (2013):7.1B
GDP per Capita (2013): $13,100
Population Growth (2013): 1.0%
GDP Growth (2013): 2.9%
GDP per capita is probably the best measure of a country’s overall well being Note. However, that growth rates vary significantly across countries/regions. Do you see a pattern here?
Region
GDP
% of
World
GDP
GDP Per
Capita
Real GDP
Growth
United States
$17T
20%
$53,000
1.6%
European Union
$16T
18%
$35,000
0.1%
Japan
$4.7T
5%
$36,300
2.0%
China
$13T
15%
$9,800
7.7%
Ghana
$90B
.1%
$3,500
7.9%
Ethiopia
$118.2B
.13%
$1,300
7.0%
Source: CIA World Factbook (2013 Estimates)
Per Capita Income
At the current trends, the standard of living in China will surpass that of the US in
25 years! Or, will they?
That is, can China maintain it’s current growth rate?
As a general rule, low income (developing) countries tend to have higher average rates of growth than do high income countries
Income
GDP/Capita
GDP Growth
Low
< $1,045
6.3%
Middle
$1,045 - $12,746
4.8%
High
>$12,746
3.2%
The implication here is that eventually, poorer countries should eventually “catch up” to wealthier countries in terms of per capita income
– a concept known as “convergence”
Source: World Bank (2013 estimates)
Some countries, however, don’t fit the normal pattern of development
Sudan
GDP: $80B (#80)
GDP Per Capita: $2,400 (#184)
GDP Growth: -11.2% (#219)
Qatar
GDP: $150B (#59)
GDP Per Capita: $179,000 (#1)
GDP Growth: 16.3% (#1)
At current trends, Per capita income in Qatar will quadruple to
$716,000 over the next decade. Over the same time period, per capita GDP in Sudan will drop by roughly 40%to $670!!!
So, what is Sudan doing wrong? (Or, what is Qatar doing right?)
To understand this, let’s look at the sources of economic growth….where does production come from?
“is a function of”
Real GDP
Y F A, K , L
Productivity
Macroeconomic
Analysis
Long Run Growth
The World Economy
Total GDP (2013): $87T
Population (2013):7.1B
GDP per Capita (2013): $13,100
Population Growth (2013): 1.0%
GDP Growth (2013): 2.9%
GDP per capita is probably the best measure of a country’s overall well being Note. However, that growth rates vary significantly across countries/regions. Do you see a pattern here?
Region
GDP
% of
World
GDP
GDP Per
Capita
Real GDP
Growth
United States
$17T
20%
$53,000
1.6%
European Union
$16T
18%
$35,000
0.1%
Japan
$4.7T
5%
$36,300
2.0%
China
$13T
15%
$9,800
7.7%
Ghana
$90B
.1%
$3,500
7.9%
Ethiopia
$118.2B
.13%
$1,300
7.0%
Source: CIA World Factbook (2013 Estimates)
Per Capita Income
At the current trends, the standard of living in China will surpass that of the US in
25 years! Or, will they?
That is, can China maintain it’s current growth rate?
As a general rule, low income (developing) countries tend to have higher average rates of growth than do high income countries
Income
GDP/Capita
GDP Growth
Low
< $1,045
6.3%
Middle
$1,045 - $12,746
4.8%
High
>$12,746
3.2%
The implication here is that eventually, poorer countries should eventually “catch up” to wealthier countries in terms of per capita income
– a concept known as “convergence”
Source: World Bank (2013 estimates)
Some countries, however, don’t fit the normal pattern of development
Sudan
GDP: $80B (#80)
GDP Per Capita: $2,400 (#184)
GDP Growth: -11.2% (#219)
Qatar
GDP: $150B (#59)
GDP Per Capita: $179,000 (#1)
GDP Growth: 16.3% (#1)
At current trends, Per capita income in Qatar will quadruple to
$716,000 over the next decade. Over the same time period, per capita GDP in Sudan will drop by roughly 40%to $670!!!
So, what is Sudan doing wrong? (Or, what is Qatar doing right?)
To understand this, let’s look at the sources of economic growth….where does production come from?
“is a function of”
Real GDP
Y F A, K , L
Productivity